UBS's "hawkish rate hike" stance does not change its long-term bullish outlook for gold: phased targets up to $5,400, with a good opportunity to increase holdings around $4,000.

Gold has recently faced headwinds from the Federal Reserve's tightening policies, but UBS believes this is not enough to shake the long-term investment logic of the metal.

According to Wall Street News, on September 16, the Federal Reserve raised the target range for the federal funds rate by 25 basis points to 3.75%-4.00% and hinted at the possibility of another rate hike later this year.

UBS strategist Giovanni Staunovo characterized the meeting as "ending a long-standing pause in hawkish rate hikes," believing that rising US real interest rates and a stronger dollar will suppress gold prices in the short term, while also warning that the large inflows into gold ETFs in August may face the risk of outflows.

However, Stauno also pointed out that this rate hike was already within market expectations and does not change the long-term investment value of gold. He cited rising global debt levels, expectations of a weakening dollar in the medium term, and the prospect of a Fed rate cut next year as key factors supporting gold demand, and viewed a price pullback to around $4,000 per ounce as an opportunity to increase holdings.

The interest rate hike has been implemented, and short-term adjustments are unavoidable, but the long-term logic remains unshaken.

The Fed's rate hike decision was in line with market expectations, but the latest dot plot shows that most officials expect at least one more rate hike this year, further reinforcing the hawkish signal.

Staunovo stated that this background "remains a negative factor for gold in the near term" because the opportunity cost of holding non-interest-bearing assets increases accordingly.

He also noted that gold ETFs recorded substantial net inflows in August, primarily driven by market concerns about the Federal Reserve's independence and rising government debt levels. However, given the hawkish tone of this week's meeting, some of these positions may face pressure to take profits or flow out.

Staunovo believes that short-term fluctuations cannot mask the deeper structural support for gold. He lists the following factors as long-term bullish: concerns about fiscal sustainability due to the continued expansion of global debt, expectations of a long-term weakening dollar, the possibility of a Fed rate cut next year, and persistently high geopolitical uncertainty.

He also pointed out that the resilience shown by gold during periods of rising real interest rates suggests that traditional interest rate-based valuation models "only reflect part of the story."

Concerns about the accessibility of reserve assets, sanctions risks, and doubts about fiscal sustainability are driving parties to gradually reduce the concentration of dollar assets, and gold, as an asset not dependent on the credit of any institution, is benefiting from this.

Central bank gold purchases provide structural support, with a target price as high as $5,400.

Central bank demand remains a key pillar for gold prices. Data shows that the People's Bank of China increased its gold holdings by approximately 20 metric tons in August, marking its 22nd consecutive month of purchases; the National Bank of Poland and the Central Bank of Uzbekistan each increased their holdings by approximately 8 metric tons.

Staunovo maintains its forecast of 750 to 1,000 metric tons of gold purchases by central banks annually, believing this will provide "significant structural support" for gold prices.

Based on the spot price of $4,342 per ounce on September 18, UBS set a series of phased price targets: $4,600 in December 2026, $5,000 in March 2027, $5,200 in June 2027, and $5,400 in September 2027.

Staunovo wrote:

We believe that the long-term investment value of gold remains positive, and a pullback to around $4,000 would present a good opportunity to increase holdings.

Risk warning and disclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.